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Unit 1
Question 1
Resources in an economy:
a) Are always fixed b) Can never decrease c) Always increase over time d) Are limited at any moment in time

Question 2
Human wants are:
a) Always fixed b) Limited c) Unlimited d) Likely to decrease over time

Question 3
The sacrifice involved when you choose a particular course of action is called the:
a) Alternative b) Opportunity cost c) Consumer cost d) Producer cost

Question 4
Which of the following is not one of the basic economic questions?
a) What to produce b) Who to produce for c) How to produce d) How to maximise economic growth

Question 5
The basic economic problems will not be solved by:
a) Market forces b) Government intervention c) A mixture of government intervention and the free market d) The creation of unlimited resources

Question 6

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The free market involves:
a) The free provision of products b) The subsidising of products by the government c) Market forces of supply and demand d) All trade via barter

Question 7
A mixed economy:
a) Has supply but not demand b) Has demand but not supply c) Has supply and demand d) Has market forces and government intervention

Question 8
In a command (planned) economy:
a) The price mechanism acts as an incentive b) Resources are allocated by market forces c) Individual firms make decisions for themselves about what to produce and how to produce it d) The The public sector is large

Question 9
The public sector includes:
a) Investors owning companies b) Government ownership of assets c) Market forces of supply and demand d) All trade via barter

Question 10
Which of the following is a normative statement in economics?
a) More spending by the government reduces poverty b) Higher taxes lead to less desire to work c) The UK economy is growing fast relative to other European Union members d) The government should concentrate on reducing unemployment

Unit 2
Question 1
If an economy is productively efficient:
a) Everyone is wealthy b) Resources are unemployed c) More of one product can only be produced if less of another product is produced d) The distribution of income is equal

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Question 2
Economic growth can be shown by:
a) An inward shift of the production possibility frontier b) A movement down the production possibility frontier c) An outward shift of the production possibility frontier d) A movement up the production possibility frontier

Question 3
As resources are shifted from one industry to another this can be shown by:
a) An inward shift of the production possibility frontier b) A movement along the production possibility frontier c) An outward shift of the production possibility frontier d) A outward shift in the demand curve for the products

Question 4
In a free market the combination of products produced will be determined by:
a) Market forces of supply and demand b) The government c) The law d) The public sector

Question 5
If an economy moves from producing 10 units of A and 4 units of B to producing 7 As and 5Bs, the opportunity cost of the 5th B is:
a) 7As b) 10As c) 3As d) 1A

Question 6
An economy may operate outside the Production Possibility Frontier if:
a) It is not utilising its resources fully b) It is being productively efficient c) It is a mixed economy d) It is trading with other economies

Question 7
The resources in the economy do not include:

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com .ning.com a) Demand b) Land c) Labour d) Capital Question 8 The resources in an economy are: a) Constantly increasing b) Fixed at any moment c) Constantly decreasing d) Able to be transferred easily between industries Question 9 Any combination of products inside the production possibility frontier is: a) Allocatively inefficient b) X inefficient c) Consumer inefficient d) Productively inefficient Question 10 An outward shift of the production possibility frontier may be caused by: a) An increase in demand b) More government spending c) Better training of employees d) Productive inefficiency Question 1 Which best describes a demand curve? a) The quantity consumers would like to buy in an ideal world b) The quantity consumers are willing to sell c) The quantity consumers are willing and able to buy at each and every income all other things unchanged d) The quantity consumers are willing and able to buy at each and every price all other things unchanged Question 2 A fall in price: a) Will cause an inward shift of demand b) Will cause an outward shift of supply c) May be caused by a fall in demand d) Leads to a higher level of production Question 3 m.salman.asif2006@gmail.-Page 4http://vustudents.ning.com http://vustudents.

com http://vustudents.com .ning.asif2006@gmail.salman.-Page 5http://vustudents.ning.com Demand for a normal product may shift outwards if: a) Price decreases b) The price of a substitute falls c) The price of a complement rises d) Income falls Question 4 According to the law of diminishing utility: a) Utility is at a maximum with the first unit b) Increasing units of consumption increase the marginal utility c) Marginal product will fall as more units are consumed d) Total utility will rise at a falling rate as more units are consumed Question 5 If marginal utility is zero: a) Total utility is zero b) An additional unit of consumption will decrease total utility c) An additional unit of consumption will increase total utility d) Total utility is maximised Question 6 A decrease in income should: a) Shift demand for an inferior product outwards b) Shift demand for an inferior product inwards c) Shift supply for an inferior product outwards d) Shift supply for an inferior product inwards Question 7 An increase in the price of a complement for product A would: a) Shift demand for product A outwards b) Shift demand for product A inwards c) Shift supply for product A outwards d) Shift supply for product A inwards Question 8 An increase in price all other things unchanged leads to: a) Shift demand outwards b) Shift demand inwards c) A contraction of demand d) An extension of demand m.

a.com .a.000 p.ning. Quantity demanded per year increases 5000 to 6000 units. Which of the following is correct? a) The price elasticity of demand is -2 b) The good is inferior c) Income elasticity is + 0.asif2006@gmail.-Page 6http://vustudents.800. Which of the following is correct? a) Demand is price inelastic b) The good is inferior c) Income elasticity is -2 d) The product is normal Question 2 The price decreases from £2. Quantity demanded per year increases 5000 to 6000 units.000 to £1.000 p. to £22.com Question 9 If a product is a Veblen good: a) Demand is inversely related to income b) Demand is inversely related to price c) Demand is directly related to price d) Demand is inversely related to the price of substitutes Question 10 If a product is an inferior good: a) Demand is inversely related to income b) Demand is inversely related to price c) Demand is directly related to price d) Demand is inversely related to the price of substitutes Unit 4 Question 1 Average income increases from £20.5 d) Income elasticity is + 2 Question 3 If the price elasticity of demand is unit then a fall in price: a) Reduces revenue b) Leaves revenue unchanged c) Increases revenue d) Reduces costs Question 4 If the cross elasticity of demand is -2: m.salman.ning.com http://vustudents.

com a) The products are substitutes and demand is cross price elastic b) The products are substitutes and demand is cross price inelastic c) The products are complements and demand is cross price elastic d) The products are complements and demand is cross price inelastic Question 5 The income elasticity is +2 and income increases by 20%. The quantity demanded was 500 units.com http://vustudents. Sales were 5000 units. Question 6 The price elasticity of demand is a negative number this means: a) Demand is price elastic b) Demand is price inelastic c) The demand curve is downward sloping d) An increase in income will reduce the quantity demanded Question 7 Price increases from 10 to 12 pence and the price elasticity of demand is -0.-Page 7http://vustudents.5.ning.com . Question 8 If demand is price inelastic: a) An increase in price must raise profits b) An increase in price decreases revenue c) An increase in price increases revenue d) A decrease in price reduces sales Question 9 For an inferior good: m. a 20% price increase will reduce the quantity demanded by 10%. this means sales will increase by 40% to 7000 units. What will it be now? a) 550 units b) 500 units c) 450 units d) 490 units This means that any given percentage fall in price leads to an increase in quantity demanded that is half as much.ning. This means the quantity demanded will be 450 units.salman.asif2006@gmail. what will they be now? a) 3000 b) 7000 c) 5500 d) 4500 This means that a percentage increase in income will lead to an increase in quantity demanded that is twice as great.

the income elasticity of demand is positive d) The price elasticity of demand is positive.asif2006@gmail.salman. the income elasticity of demand is negative c) The price elasticity of demand is negative. the income elasticity of demand is negative b) The price elasticity of demand is positive. the income elasticity of demand is negative c) The price elasticity of demand is negative.com http://vustudents.com a) The price elasticity of demand is negative.-Page 8http://vustudents. the income elasticity of demand is positive Question 10 For a normal good: a) The price elasticity of demand is negative.com . the income elasticity of demand is negative b) The price elasticity of demand is positive.ning. the income elasticity of demand is positive Unit 5 Question 1 Which best describes a supply curve? a) The quantity consumers would like to buy in an ideal world b) The quantity producers are willing and able to sell at each and every price all other things unchanged c) The quantity producers are willing and able to sell at each and every income all other things unchanged d) The quantity producers are willing and able to sell at each and every point in time all other things unchanged Question 2 If a 4% increase in price leads to a increase in the quantity supplied of 8%: a) Supply is price elastic b) Supply is income elastic c) Price elasticity of demand is -2 d) Price elasticity of supply is -2 Question 3 Supply is likely to be more price elastic: a) In the short run rather than the long run b) If factors of production are relatively immobile between industries c) If there are very few producers d) If it is easy to expand output Question 4 A supply curve that starts at the origin has: a) A price elasticity of supply greater than one b) A price elasticity of supply equal to one c) A price elasticity of supply less than one d) A positive price elasticity of supply Question 5 m. the income elasticity of demand is positive d) The price elasticity of demand is positive.ning.

Sales were originally 200 units.5.5 c) . Question 10 The price elasticity of supply is +4.com .salman. this means the price elasticity of supply is +0. The price increases by 15%.com http://vustudents.asif2006@gmail.com A contraction in supply occurs when: a) Demand shifts outwards b) The supply curve shifts inwards c) The quantity supplied falls when the price falls d) The supply curve shifts outwards Question 6 An increase in the costs of production will: a) Shift demand outwards b) Shift demand inwards c) Shift supply outwards so more is supplied at each and every price. more supplied at each and every price) d) Lead to a higher equilibrium and lower equilibrium quantity Question 9 An increase in price from 25 pence to 30 pence leads to an increase in the quantity supplied from 40 units to 44 units.-Page 9http://vustudents. all other things unchanged d) Shift supply inwards Question 7 An increase in price all other things unchanged leads to: a) A shift in supply outwards b) A shift in supply inwards c) A contraction of supply d) An extension of supply Question 8 An increase in productivity should: a) Lead to a contraction of supply b) Lead to an expansion of supply c) Lead to a shift in supply outwards (i.0.ning.ning.2 d) . price increases 20%.5 Quantity supplied increases 10%. The price elasticity of supply is: a) + 2 b) + 0. What will they be now? a) 80 units m.e.

Unit 6 Question 1 If demand increases in a market this will usually lead to: a) A higher equilibrium price and output b) A lower equilibrium price and higher output c) A lower equilibrium price and output d) A higher equilibrium price and lower output Question 2 An increase in income will: a) Lead to a movement along the demand curve b) Shift the supply curve c) Shift the demand curve d) Lead to an extension of demand Question 3 A reduction in the costs of production will: a) Lead to a movement along the supply curve b) Shift the demand curve c) Shift the supply curve d) Lead to an extension of supply Question 4 A shift in supply will have a bigger effect on price than output if demand is: a) Income elastic b) Income inelastic c) Price elastic d) Price inelastic Question 5 Assuming a downward sloping demand curve and upward sloping supply curve. a higher equilibrium price may be caused by: a) An fall in demand b) An increase in supply c) Improvements in production technology m.ning. this means the quantity supplied increases by 120 units.asif2006@gmail.com http://vustudents.salman.-Page 10http://vustudents.ning.com b) 320 units c) 60 units d) 120 units The change in quantity supplied will be 4*15%=60%.com .

ning.asif2006@gmail.-Page 11http://vustudents.com .ning.com http://vustudents.salman.com d) An increase in demand Question 6 If the price was fixed below the equilibrium price there would be: a) Excess supply b) Excess demand c) Equilibrium d) Downward pressure on prices Question 7 A movement along the demand curve may be caused by: a) A change in income b) A change in the number of buyers c) A change in advertising d) A shift in supply Question 8 A subsidy paid to producers: a) Shifts the supply curve b) Shifts the demand curve c) Leads to a contraction in supply d) Leads to an extension of supply Question 9 A movement along the supply curve may be caused by: a) A change in technology b) A change in the number of producers c) A shift in demand d) A change in costs Question 10 The price mechanism cannot: a) Act as a signal b) Act as an incentive c) Act as a rationing device d) Shift the demand curve Unit 7 Question 1 Which best describes consumer surplus? m.

com .2 c) The price elasticity of supply is + 2 d) The price elasticity of supply is infinity A shift in demand will have more effect on price than quantity if supply is price inelastic e.asif2006@gmail.g.2.salman.com a) The price consumers are willing to pay for a unit b) The cost of providing a unit c) The profits made by a firm d) The difference the price a consumer pays for an item and the price he/she is willing to pay Question 2 The price mechanism does not act as a: a) Signal b) Incentive c) Rationing device d) Indicator of income Question 3 A shift in demand will have more effect on price than quantity if: a) The price elasticity of supply is price inelastic b) The price elasticity of supply is price elastic c) The price elasticity of supply is perfectly elastic d) The price elasticity of supply is infinity Question 4 A shift in demand will have more effect on price than quantity if: a) The price elasticity of supply is + 3 b) The price elasticity of supply is + 0. the price elasticity of supply is + 0. Question 5 A shift in supply will have more effect on price than quantity if: a) The price elasticity of demand is -3 b) The price elasticity of demand is -0. Question 6 A decrease in demand for a product should: a) Increase equilibrium price and quantity b) Decrease equilibrium price and quantity c) Increase equilibrium price and decrease quantity d) Decrease equilibrium price and increase quantity m.-Page 12http://vustudents.ning. the price elasticity of demand is -0.g.2.ning.2 c) The price elasticity of demand is -2 d) The price elasticity of demand is infinity A shift in supply will have more effect on price than quantity if the price elasticity of demand is price inelastic e.com http://vustudents.

asif2006@gmail.com Question 7 An increase in demand for a product should: a) Increase equilibrium price and quantity b) Decrease equilibrium price and quantity c) Increase equilibrium price and decrease quantity d) Decrease equilibrium price and increase quantity Question 8 "Income inequality can be high in the free market and should be reduced.-Page 13http://vustudents.ning." This is an example of what? a) Judicial economic statement b) Positive economic statement c) Formative economic statement d) Normative economic statement Question 9 A public good will: a) Be underprovided in the free market b) Be overprovided in the free market c) Not be provided in the free market d) Has no opportunity cost Question 10 A positive externality occurs when: a) The social marginal costs are higher than the private marginal costs b) A product is not provided in the free market c) The social marginal cost equals the social marginal benefit d) The social marginal benefits are higher than the private marginal benefits Unit 8 Question 1 If the price in a market is fixed by the government below equilibrium: a) There is excess equilibrium b) There is excess supply c) There is excess demand d) There is equilibrium m.com http://vustudents.salman.com .ning.

asif2006@gmail.-Page 14http://vustudents.ning.salman.com .ning.com http://vustudents.com Question 2 If the price in a market is fixed by the government above equilibrium: a) There is excess equilibrium b) There is excess supply c) There is excess demand d) There is equilibrium Question 3 Merit goods are: a) Not provided in the free market economy b) Under provided in the free market economy c) Over provided in the free market economy d) Provided free Question 4 Agricultural prices tend to be unstable because: a) Supply is price elastic b) Demand is price elastic c) Supply is stable d) Demand and supply are price inelastic Question 5 When supply increases in an agricultural market farmer's earnings might fall because: a) Supply is price elastic b) Demand is price inelastic c) The government buys up all the excess production d) All output must be sold at a maximum price Question 6 Which of the following is the government most likely to subsidise? a) Negative externalities b) Positive externalities c) Monopolies d) Oligopolies Question 7 With a positive externality: a) There is under-consumption in the free market b) There is over consumption in the free market c) The government may tax to decrease production m.

ning.com .-Page 15http://vustudents.com d) Society could be made off if less was produced Question 8 A public good: a) Is provided by the government b) Is free c) Has the properties of being non-excludable and non-diminishable d) Has external costs Question 9 Nationalisation occurs when: a) The government sells assets to a the private sector b) The government bans a product c) The government takes control of an industry d) The government taxes a product to a raise its price Question 10 If a maximum price is set below equilibrium there will be: a) A price fall b) A price increase c) Excess supply d) Excess demand Unit 9 Question 1 Which of the following is true? a) If the marginal cost is greater than the average cost the average cost falls b) If the marginal cost is greater than the average cost the average cost increases c) If the marginal cost is positive total costs are maximised d) If the marginal cost is negative total costs increase at a decreasing rate if output increases Question 2 According the law of diminishing returns: a) The marginal product falls as more units of a variable factor are added to a fixed factor b) Marginal utility falls as more units of a product are consumed c) The total product falls as more units of a variable factor are added to a fixed factor d) The marginal product increases as more units of a variable factor are added to a fixed factor Question 3 m.salman.ning.com http://vustudents.asif2006@gmail.

salman.-Page 16http://vustudents.com The law of diminishing returns assumes: a) There are no fixed factors of production b) There are no variable factors of production c) Utility is maximised when marginal product falls d) Some factors of production are fixed Question 4 When internal economies of scale occur: a) Total costs fall b) Marginal costs increase c) Average costs fall d) Revenue falls Question 5 The first level of output at which the long run average costs are minimised is called: a) The Minimum Efficient Scale b) The Minimum External Scale c) The Maximum External Scale d) The Maximum Effective Scale Question 6 The average variable cost curve: a) Is derived from the average fixed costs b) Converges with the average cost as output increases c) Equals the total costs divided by the output d) Equals revenue minus profits Question 7 If marginal cost is positive and falling: a) Total cost is falling b) Total cost is increasing at a falling rate c) Total cost is falling at a falling rate d) Total cost is increasing at an increasing rate Question 8 Total increases from £500 to £600 when output increases from 20 to 30 units.com http://vustudents.ning. Which of the following is true? a) Marginal cost is £20 b) Average cost falls c) Variable cost rises by £100 d) Average fixed cost is £10 m.ning.asif2006@gmail.com . Fixed costs are £200.

com .com http://vustudents. Which of the following is true? a) Marginal cost is £20 b) Average cost rises c) Variable cost rises by £200 d) Average fixed cost was £10 originally Question 10 If marginal product is below average product: a) The total product will fall b) The average product will fall c) Average variable costs will fall d) Total revenue will fall Unit 10 Question 1 If the marginal revenue is less than the marginal cost then to profit maximise a firm should: a) Reduce output b) Increase output c) Leave output where it is d) Increase costs Question 2 If the price is less than the average costs but higher than the average variable costs: a) The firm is making a loss and will shutdown in the short term b) The firm is making a profit c) The firm is making a loss but will continue to produce in the short term d) The firm is making a loss and is making a negative contribution to fixed costs Question 3 If firms earn normal profits: a) They will aim to leave the industry b) Other firms will join the industry c) The revenue equals total costs d) No profit is made in accounting terms Question 4 m.-Page 17http://vustudents.com Question 9 Total increases from £500 to £600 when output increases from 20 to 30 units. Fixed costs are £200.asif2006@gmail.salman.ning.ning.

ning.ning.com In the long term a firm will produce provided the revenue covers: a) Fixed costs b) Variable costs c) Total costs d) Revenue Question 5 In the short term a firm will produce provided the revenue: a) Covers fixed costs b) Covers variable costs c) Covers total costs d) Covers revenue Question 6 The profit per sale is a measure of: a) Profit b) Profitability c) Feasibility d) Realism Question 7 The total costs are £2000 and 10 units are produced.salman.-Page 18http://vustudents.com . The marginal cost of an 11th unit is £1300.asif2006@gmail. Which of the following is true? a) The average cost increases from £20 to £30 b) The total costs for 11 units are £700 c) The average cost for 10 units is £1300 d) The average cost for 11 units is £1300 Question 8 Total revenue equals: a) Price plus quantity b) Price multiplied by quantity sold c) Price divided by the quantity sold d) Price minus quantity sold Question 9 If marginal revenue equals marginal cost: a) No profit is being made b) Total revenue equals total cost c) Profits are maximised d) Producing another unit would increase profits m.com http://vustudents.

ning.salman.com http://vustudents.com Question 10 Price equals: a) Total revenue .com .quantity b) Total revenue / quantity sold c) Total quantity sold * quantity sold d) Total revenue / total cost Unit 11 Question 1 Firms in perfect competition face a: a) Perfectly elastic demand curve b) Perfectly inelastic demand curve c) Perfectly elastic supply curve d) Perfectly inelastic supply curve Question 2 In perfect competition: a) The price equals the marginal revenue b) The price equals the average variable cost c) The fixed cost equals the variable costs d) The price equals the total costs Question 3 A profit maximising firm in perfect competition produces where: a) Total revenue is maximised b) Marginal revenue equals zero c) Marginal revenue equals marginal cost d) Marginal revenue equals average cost Question 4 In perfect competition: a) The products firm offer are very similar b) Products are heavily differentiated c) A few firms dominate the market d) Consumers have limited information Question 5 In the long run in perfect competition: a) The price equals the total revenue m.asif2006@gmail.ning.-Page 19http://vustudents.

ning.ning.com b) Firms are allocatively inefficient c) Firms are productively efficient d) The price equals total cost Question 6 In perfect competition: a) Short run abnormal profits are competed away by firms leaving the industry b) Short run abnormal profits are competed away by firms entering the industry c) Short run abnormal profits are competed away by the government d) Short run abnormal profits are competed away by greater advertising Question 7 In perfect competition: a) A few firms dominate the industry b) Firms are price makers c) There are many buyers but few sellers d) There are many buyers and sellers Question 8 In the short run firms in perfect competition will still produce provided: a) The price covers average variable cost b) The price covers variable cost c) The price covers average fixed cost d) The price covers fixed costs Question 9 In the long run in perfect competition: a) Price = average cost = marginal cost b) Price = average cost = total cost c) Price = marginal revenue = total cost d) Total revenue = total variable cost Question 10 For a perfectly competitive firm: a) Price equals marginal revenue b) Price is greater than marginal revenue c) Price equals total revenue d) Price equals total cost Unit 12 Question 1 m.com .com http://vustudents.-Page 20http://vustudents.salman.asif2006@gmail.

ning.asif2006@gmail.com http://vustudents.com X inefficiency occurs when: a) The price is greater than the marginal cost b) The price is greater than the average cost c) Costs are higher than they could be due to a lack of competitive pressure d) There are external costs Question 2 The marginal revenue curve in monopoly: a) Equals the demand curve b) Is parallel with the demand curve c) Lies below and converges with the demand curve d) Lies below and diverges from the demand curve Question 3 In monopoly when abnormal profits are made: a) The price set is greater than the marginal cost b) The price is less than the average cost c) The average revenue equals the marginal cost d) Revenue equals total cost Question 4 In monopoly in long run equilibrium: a) The firm is productively efficient b) The firm is allocatively inefficient c) The firm produces where marginal cost is less than marginal revenue d) The firm produces at the socially optimal level Question 5 Barriers to entry do not include a) Patents b) Internal economies of scale c) Mobility of resources d) High investment costs Question 6 In a monopoly which of the following is not true? a) Products are differentiated b) There is freedom of entry and exit into the industry in the long run c) The firm is a price taker d) There is one main seller m.com .ning.salman.-Page 21http://vustudents.

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Question 7
In monopoly which of the following is true?
a) There are many buyers and sellers b) There is one main buyer c) There is one main seller d) The actions of one firm do not affect the market price and quantity

Question 8
According to Schumpeter:
a) Monopolies are inefficient b) Monopoly profits act as an incentive for innovation c) Monopolies are alocatively efficient d) Monopolies are productively efficient

Question 9
A welfare loss occurs in monopoly where:
a) The price is greater than the marginal cost b) The price is greater than the marginal benefit c) The price is greater than the average revenue d) The price is greater than the marginal revenue

Question 10
In the UK the government:
a) Bans monopolies b) Fines all monopolies c) Prevents firms acquiring more than 25% of the market d) Has the right to investigate monopolies and will assess each one on its own merits

Unit 13
Question 1
If a few firms dominate an industry the market is known as:
a) Monopolistic competition b) Competitively monopolistic c) Duopoly d) Oligopoly

Question 2
In a cartel member firms may be given a fixed amount to produce. This is called a:
a) Limit

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b) Factor c) Quota d) Quotient

Question 3
In the Kinked Demand Curve theory it is assumed that:
a) An increase in price by the firm is not followed by others b) An increase in price by the firm is followed by others c) A decrease in price by the firm is followed by others d) Firms collude to fix the price

Question 4
The Kinked Demand Curve theory assumes:
a) Firms cooperate b) Firms act as part of a cartel c) Firms are competitive d) Firms are not profit maximisers

Question 5
In Game Theory:
a) Firms are assumed to act independently b) Firms are assumed to cooperate with each other c) Firms collude as part of a cartel d) Firms consider the actions of others before deciding what to do

Question 6
In the kinked demand curve theory:
a) There is a kink in the marginal cost curve b) Demand is price inelastic c) Demand is price elastic d) Non price competition is likely

Question 7
Firms in oligopoly are likely to:
a) Invest heavily in branding b) Act independently of other firms c) Try to differentiate its products d) Try to be a price maker

Question 8
A model of Game Theory of oligopoly is known as the:

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a) Prisoner's Dilemma b) Monopoly Cell c) Jailhouse Sentence d) Jury Box

Question 9
In cartels:
a) Each individual firm profit maximises b) There may be an incentive to cheat c) The industry as a whole is loss making d) There is no need to police agreements

Question 10
In a cartel:
a) Firms compete against each other b) Price wars are common c) Firms use price to win market share from competitors d) Firms collude

Unit 14
Instructions Question 1
In monopolistic competition:
a) Firms face a perfectly elastic demand curve b) All products are homogeneous c) Firms make normal profits in the long run d) There are barriers to entry to prevent entry

Question 2
In monopolistic competition:
a) Demand is perfectly elastic b) Products are homogeneous c) Marginal revenue = price d) The marginal revenue is below the demand curve and diverges

Question 3
In monopolistic competition firms profit maximise where:
a) Marginal revenue = Average revenue b) Marginal revenue = Marginal cost c) Marginal revenue = Average cost d) Marginal revenue = Total cost

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ning.com Question 4 Which of the following is not one of the four Ps in marketing? a) Product b) Price c) Place d) Presence Question 5 Effective branding will tend to make: a) Demand more price inelastic b) Supply more price inelastic c) Demand more income elastic d) Supply more income elastic Question 6 In monopolistic competition if firms are making abnormal profit other firms will enter and: a) The marginal cost will shift outwards b) The demand curve will shift inwards c) The average cost will shift downwards d) The average variable cost will increase Question 7 In Porter's five forces model conditions are more favourable for firms within an industry if: a) Buyer power is high b) Supplier power is high c) Entry threat is low d) Substitute threat is high Question 8 If a firm takes over a competitor then.com .ning. according to Porter's 5 forces model.salman.: a) Buyer power is higher b) Supplier power is higher c) Substitute threat is higher d) Rivalry is lower Question 9 In marketing "USP" stands for: m.com http://vustudents.-Page 25http://vustudents.asif2006@gmail.

com .ning.asif2006@gmail.-Page 26http://vustudents.salman.com a) Unique Selling Proposition b) Underlying Sales Pitch c) Unit Sales Point d) Under Sales Procedure Question 10 In monopolistic competition: a) There are few sellers b) There are few buyers c) There is one seller d) There are many sellers Unit 15 Question 1 Barriers to entry: a) Do not exist in monopoly b) Cannot exist in oligopoly c) Do not exist in monopolistic competition d) Do exist in perfect competition Question 2 Which best describes price discrimination? a) Charging different prices for different products b) Charging the same prices for different products c) Charging the same prices for the same products d) Charging different prices for the same products Question 3 For a firm operating in two markets and price discriminating the profit maximising condition is: a) Marginal revenue in A = Price B b) Marginal revenue in A = Marginal revenue B = Price A = Price B c) Marginal revenue in A = Marginal revenue B = Marginal cost d) Marginal revenue in A = Marginal revenue B = Average cost Question 4 If the price elasticity of demand for a product in market A is -0.com http://vustudents.2 and in market B is -3 a price discriminator will charge: a) The higher price in market A b) The higher price in market B c) The same price in both markets d) Cannot tell which price will be higher m.ning.

salman.com .-Page 27http://vustudents.ning.com http://vustudents.com Question 5 In perfect price discrimination: a) Consumer surplus is maximised b) Produce surplus is zero c) Community surplus is maximised d) Consumer surplus is zero Question 6 A benefit to consumers of price discrimination is that: a) Some products are produced that would not otherwise be produced b) Producer surplus increases c) Consumer surplus decreases d) Firms' profits increase Question 7 In perfect price discrimination: a) The demand curve is the marginal cost curve b) The average revenue equals the average cost c) The marginal cost is the average cost curve d) The demand curve is the marginal revenue Question 8 In price discrimination abnormal profits are made if: a) Average revenue is greater than average variable cost b) Average revenue is greater than average cost c) Average revenue is greater than marginal revenue d) Average revenue is greater than average fixed cost Question 9 Barriers to entry: a) Enable abnormal profits to be made in the long run b) Enable losses to be made in the long run c) Enable abnormal profits to be made in the short run only d) Occur in perfect competition Question 10 If the price elasticity is -0.ning.asif2006@gmail.3 this means: a) Demand is upward sloping b) Demand is price elastic m.

ning.com .com c) A price fall would increase revenue d) Demand is price inelastic Unit 16 Question 1 If one car company takes over another car company this is an example of which type of integration? a) Vertical b) Horizontal c) Conglomerate d) Literal Question 2 If a car company takes over a clothes business this is an example of which type of integration? a) Vertical b) Horizontal c) Conglomerate d) Literal Question 3 Horizontal integration may lead to internal economies of scale.com http://vustudents. Which of the following is not a type of internal economy of scale? a) Purchasing b) Technical c) Financial d) Safety Question 4 Acquisition and merger are examples of: a) Internal growth b) External growth c) Organic growth d) Underlying growth Question 5 Unfair competition does not include: m.-Page 28http://vustudents.asif2006@gmail.salman.ning.

com a) Price cutting b) Predatory pricing c) Cartels d) Price fixing Question 6 If firms join together to set prices and quantities this is known as what? a) Interaction b) Conglomerate c) Collusion d) Integration Question 7 In the Ansoff matrix a strategy focusing on new products and new markets is known as: a) New product development b) Diversification c) Market development d) Market penetration Question 8 A monopoly in the UK can be investigated if it has a market share of: a) 100% b) 10% or over c) 25% or over d) 33% or over Question 9 Anti-competitive behaviour in the UK can lead to fines of up to: a) 10% of profits b) 10% of turnover c) 10% of costs d) 25% of market share Question 10 An example of backward vertical integration is: a) A supermarket buying a farm b) A supermarket buying another supermarket c) A supermarket buying an insurance company d) A supermarket buying a car rental business Unit 17 Question 1 m.com http://vustudents.ning.asif2006@gmail.salman.com .-Page 29http://vustudents.ning.

asif2006@gmail.com http://vustudents.fixed costs b) Fixed cost + revenue c) Revenue .com To maximise sales revenue a firm should produce where: a) Marginal cost is zero b) Marginal revenue is maximised c) Marginal revenue is zero d) Marginal revenue equals marginal cost Question 2 To maximise growth without making a loss a firm should produce the highest output where: a) Average revenue equals marginal cost b) Average revenue equals average cost c) Marginal revenue equals marginal cost d) Average cost equals marginal cost Question 3 Profit is measured by: a) Revenue .sales d) Revenue .total costs Question 4 When marginal revenue equals marginal cost: a) Total revenue equals total cost b) There is the biggest positive difference between total revenue and total cost c) There is the biggest negative difference between total revenue and total cost d) Profits are zero Question 5 To be allocatively efficient a firm must produce where: a) The total cost equals demand b) The average revenue equals the marginal revenue c) The price equals the average cost d) The price equals the marginal cost Question 6 To be productively efficient a firm must produce where: a) Marginal costs are maximised b) Marginal costs are minimised c) Average costs are minimised d) Average revenue is maximised m.-Page 30http://vustudents.com .ning.ning.salman.

com Question 7 Normal profit occurs when: a) Average revenue equals average variable cost b) Marginal revenue equals marginal cost c) Average revenue equals marginal cost d) Average revenue equals average cost Question 8 If the marginal revenue is positive: a) Selling another unit will increase total revenue b) Selling another unit will increase profits c) Selling another unit will increase costs d) Selling another unit will increase average revenue Question 9 Companies in the private sector are owned by: a) The government b) Shareholders c) Employees d) The community Question 10 An independent assessment of the impact of firm's activities on society is called a: a) Financial audit b) Balance sheet c) Profit and loss account d) Social audit Unit 18 Question 1 An increase in the wage rate: a) Will usually lead to more people employed b) Will decrease total earnings if the demand for labour is wage elastic c) Is illegal in a free market d) Will cause a shift in the demand for labour Question 2 The Marginal Revenue Product is likely to be wage inelastic if: a) Labour costs are a high percentage of total costs b) Demand for the final product is price inelastic m.com .asif2006@gmail.com http://vustudents.-Page 31http://vustudents.salman.ning.ning.

salman.com c) It is relatively easy to substitute capital for labour d) There are many substitutes for the final product Question 3 A fall in demand for labour is likely to lead to: a) A lower equilibrium wage and lower quantity of labour b) A lower equilibrium wage and higher quantity of labour c) A higher equilibrium wage and higher quantity of labour d) A higher equilibrium wage and lower quantity of labour Question 4 A decrease in the supply of labour is likely to lead to: a) A lower equilibrium wage and lower quantity of labour b) A lower equilibrium wage and higher quantity of labour c) A higher equilibrium wage and higher quantity of labour d) A higher equilibrium wage and lower quantity of labour Question 5 The Marginal Revenue Product is: a) Upward sloping due to the law of demand b) Upward sloping due to the law of marginal utility c) Downward sloping due to the law of diminishing returns d) Downward sloping due to the law of supply Question 6 Demand for labour is more likely to be wage inelastic if: a) Wages are a small proportion of total costs b) Demand for the final product is price elastic c) It is easy to replace labour d) Capital is a good substitute for labour Question 7 A profit maximising firm will employ labour up to the point where: a) Marginal revenue = marginal product b) Marginal cost = marginal product c) Marginal revenue product = average cost of labour d) Marginal revenue product = marginal cost of labour Question 8 m.ning.asif2006@gmail.com .-Page 32http://vustudents.ning.com http://vustudents.

salman.com . then other things unchanged: a) There will be equilibrium in the labour market b) There will excess demand in the labour market c) There will be excess supply in the labour market d) More people will be employed Unit 19 Question 1 Which of the following is a macroeconomic issue? a) The price of houses in Oxford b) The wage rate for plumbers in London c) Your decision to work or stay at home d) The level of unemployment in the UK Question 2 What is meant by an objective? a) A policy b) A way of reaching a target c) A target d) A strategy Question 3 Which of the following is not involved with fiscal policy? a) Income tax b) National insurance m.com http://vustudents.ning.asif2006@gmail.ning.com In a perfectly competitive labour market firms are wage takers and the marginal cost of labour equals: a) The average cost of labour b) The marginal product c) The marginal revenue d) The total cost of labour Question 9 If employees cannot accept a job because of the costs of moving this is known as: a) Occupational immobility b) Cyclical unemployment c) Structural immobility d) Geographical immobility Question 10 If the minimum wage is set above the equilibrium wage rate.-Page 33http://vustudents.

salman.ning.asif2006@gmail.com http://vustudents.ning.-Page 34http://vustudents.com c) VAT d) Interest rates Question 4 Which does the government not control directly? a) Spending on health b) Spending on defence c) Firms' investment decisions d) Spending on education Question 5 Which of the following is not a macroeconomic issue? a) Unemployment b) Inflation c) The wages paid to footballers d) Economic growth Question 6 Which of the following can the government not use directly to control the economy? a) Pay rates within the private sector b) Pay rates in the public sector c) Investment in education d) Benefits available for the unemployed and sick Question 7 Which of the following is a policy instrument as opposed to a government objective? a) Lower interest rates b) A better balance of trade position c) Faster economic growth d) Lower unemployment Question 8 Which of the following is a possible government objective as opposed to a policy? a) Lower interest rates b) Lower taxation rates c) Lower government spending d) Lower inflation Question 9 Which of the following is not likely to be a government objective? m.com .

com http://vustudents.com a) Increasing employment b) Increasing economic growth c) Increasing government spending d) Increasing the level of exports Question 10 "Reducing inflation is a more important objective than economic growth" is an example of: a) Normative economics b) Positive economics c) Objective economics d) Reality economics Unit 20 Question 1 a) Decrease aggregate demand b) Always equal savings c) Always equal national income d) Include investment and export spending Question 2 An increase in national income is: a) Likely to increase exports b) Likely to decrease savings c) Likely to decrease investment d) Likely to increase spending on imports Question 3 An increase in national income is likely to: a) Decrease tax receipts b) Worsen the balance of trade c) Automatically cause an increase in government spending d) Cause an increase in injections into the economy Question 4 A significant increase in the government budget deficit is likely to: a) Reduce injections into the economy b) Reduce national income c) Move the economy away from full employment d) Boost aggregate demand Question 5 m.com .-Page 35http://vustudents.ning.asif2006@gmail.salman.ning.

ning.com http://vustudents.com .asif2006@gmail.-Page 36http://vustudents.salman.ning.com If injections are greater than withdrawals: a) National income will increase b) National income will decrease c) National income will stay in equilibrium d) Prices will fall Question 6 Injections are: a) Assumed to be exogeneous b) Assumed to be a function of national income c) Decrease aggregate demand d) Decrease the investment into an economy Question 7 For equilibrium in an open four sector economy: a) Actual injections = actual withdrawals b) Planned injections = planned withdrawals c) Savings = investment d) Government spending = tax revenue Question 8 A deflationary policy could include: a) Increasing injections b) Reducing taxation rates c) Reducing interest rates d) Reducing government spending Question 9 A reflationary policy: a) Increases aggregate supply b) Increases aggregate demand c) Decreases the price level d) Increases full employment Question 10 Which of the following is an injection into the economy? a) Investment b) Savings c) Taxation d) Import spending Unit 21 m.

ning.salman.-Page 37http://vustudents.com Question 1 Gross National Product equals: a) Net National Product adjusted for inflation b) Gross Domestic Product adjusted for inflation c) Gross Domestic Product plus net property income from abroad d) Net National Product plus net property income from abroad Question 2 Net National Product equals: a) Gross National Product adjusted for inflation b) Gross Domestic Product adjusted for inflation c) Gross Domestic Product plus net property income from abroad d) Gross National Product minus depreciation Question 3 The standard of living is often measured by: a) Real GDP per capita b) Real GDP c) Real GDP * population d) Real GDP plus depreciation Question 4 In a recession: a) Unemployment is likely to be low b) Prices are likely to increase c) Growth is negative d) Growth is slow Question 5 In a boom: a) Surpluses are likely to occur b) Prices are likely to fall c) Supply will increase immediately to match demand d) Shortages may occur Question 6 GDP plus net property income from abroad equals what? a) GNP b) NNP m.asif2006@gmail.com .ning.com http://vustudents.

asif2006@gmail.com c) Depreciation d) Real GDP Question 7 To adjust GDP from market prices to factor cost: a) Add indirect taxes b) Subtract subsidies c) Deduct indirect taxes and subsidies d) Deduct indirect taxes and add subsidies Question 8 To adjust from Gross National Product to Net National Product: a) Deduct depreciation b) Deduct indirect taxes c) Deduct subsidies d) Add inflation Question 9 In a recession a government: a) Is likely to want to increase demand in the economy b) Is likely to want to decrease demand in the economy c) Is likely to want to stabilise demand in the economy d) Is likely to want to increase supply in the economy Question 10 A higher GDP per capita may not mean that the quality of life has really improved because: a) It measures wealth not income b) It measures Gross Domestic Product c) It does not measure the quality of the items produced d) It is only measured every five years Unit 22 Question 1 Economic growth can be measured by: a) The CPI b) The CBI c) GDP d) MPC Question 2 m.salman.com .ning.-Page 38http://vustudents.ning.com http://vustudents.

asif2006@gmail.com .ning. GDP: a) Grows negatively b) Grows slowly c) Grows by 0% d) Grows rapidly Question 4 If labour productivity per week is 200 units and there are 5 employees what is the total output? a) 40 units b) 195 units c) 1000 units d) 200 units Question 5 Labour productivity measures: a) The output per worker b) The output per machine c) Total output d) Marginal output Question 6 Potential growth measures: a) The growth of the fastest economy in the world b) The fastest growth an economy has ever achieved c) The present rate of growth of an economy d) The rate of growth that could be achieved if resources were fully employed Question 7 Economic growth can be seen by an outward shift of: a) The Production Possibility Frontier b) The Gross Domestic Barrier c) The Marginal Consumption Frontier d) The Minimum Efficient Scale m.-Page 39http://vustudents.salman.com http://vustudents.ning.com In a boom: a) Unemployment is likely to fall b) Prices are likely to fall c) Demand is likely to fall d) Imports are likely to grow Question 3 In a recession.

ning.-Page 40http://vustudents.com http://vustudents.salman.asif2006@gmail.com .ning.com Question 8 The socially optimal rate of growth is: a) Zero b) Negative c) Where the marginal social benefit = the marginal social cost d) Total social costs are minimised Question 9 To anticipate what the economy is going to do next the government will look at: a) Lagging indicators b) Flashing indicators c) Coincidental indicators d) Leading indicators Question 10 When an economy first begins to grow more slowly: a) GDP increases b) Inflation is likely to increase c) Stock levels are likely to increase d) Investment in equipment is likely to increase Unit 23 Question 1 A shift in aggregate supply is likely to: a) Reduce the general price level and reduce national income b) Reduce the general price level and increase national income c) Increase the general price level and reduce national income d) Increase the general price level and increase national income Question 2 Aggregate demand will increase if: a) Consumption falls b) Investment falls c) Exports fall d) Imports fall Question 3 An increase in aggregate demand will have most effect on prices if: a) Aggregate supply is price inelastic m.

ning.com .-Page 41http://vustudents.com http://vustudents.com b) Aggregate supply is price elastic c) Aggregate supply has a unitary price elasticity d) Aggregate demand is price inelastic Question 4 Which of the following would increase aggregate demand? a) Increased saving b) Increasing import spending c) Increased taxation revenue d) Increased investment Question 5 Which of the following would decrease aggregate demand? a) Increased consumption b) Increasing export revenue c) Increased taxation revenue d) Increased investment Question 6 Improved training of employees would: a) Shift aggregate supply to the right b) Shift aggregate supply to the left c) Shift aggregate demand to the right d) Shift aggregate demand to the left Question 7 Increased unemployment benefits and less incentive to work would: a) Shift aggregate supply to the right b) Shift aggregate supply to the left c) Shift aggregate demand to the right d) Shift aggregate demand to the left Question 8 Increased levels of consumption: a) Shift aggregate supply to the right b) Shift aggregate supply to the left c) Shift aggregate demand to the right d) Shift aggregate demand to the left Question 9 Increased levels of spending on imports: m.asif2006@gmail.salman.ning.

com a) Shift aggregate supply to the right b) Shift aggregate supply to the left c) Shift aggregate demand to the right d) Shift aggregate demand to the left Question 10 An increase in aggregate demand if aggregate supply is totally inelastic will: a) Increase price but not output b) Increase output but not price c) Increase output and price d) Decrease output and price Unit 24 Question 1 If the marginal propensity to consume on domestic products is 0. total consumption is what? a) 0.ning.8 Yd then when disposable income is £1000.ning.9 the size of the multiplier is: a) 10 b) 1 c) 9 d) 0. Question 2 An increase in the marginal propensity to consume will: a) Increase the size of the multiplier b) Increase the marginal propensity to save c) Decrease national income d) Reduce injections into the economy Question 3 If the Keynesian consumption function is C = 10 + 0. total consumption = 10 + 0.com http://vustudents. the marginal propensity to consume is what? m.8 Yd then when disposable income is £1000.salman.-Page 42http://vustudents.1 The multiplier is (1/1-mpc) so if the mpc is 0.asif2006@gmail.1 the multiplier is 10.com .81 If the Keynesian consumption function is C = 10 + 0.8 b) 800 c) 810 d) 0.8 Yd then when disposable income is £1000.8(1000) = 810 Question 4 If the Keynesian consumption function is C = 10 + 0.

8.8 Yd then when disposable income is £1000.8 Yd then when disposable income is £1000.81 Question 6 As income increases: a) The average propensity to consume gets nearer in value to the marginal propensity to consume b) The average propensity to consume diverges in value from the marginal propensity to consume c) The average propensity to consume falls d) The average propensity to consume always approaches 0 Question 7 An increase in consumption at any given level of income is likely to lead to: a) A fall in savings b) An increase in exports c) A fall in taxation revenue d) A decrease in import spending Question 8 Lower interest rates are likely to: a) Decrease consumption b) Increase cost of borrowing c) Encourage saving d) Increase spending Question 9 Friedman's theory of consumption focuses on: a) Past income b) Current income c) Disposable income m.com a) 0.81 If the Keynesian consumption function is C = 10 + 0.com .8 b) 800 c) 810 d) 0. Question 5 If the Keynesian consumption function is C = 10 + 0.salman.-Page 43http://vustudents.ning.8 b) 800 c) 810 d) 0.8 Yd then when disposable income is £1000.com http://vustudents. the average propensity to consume = 810/1000=0.asif2006@gmail. the marginal propensity to consumer is 0.ning.81 If the Keynesian consumption function is C = 10 + 0. the average propensity to consume is what? a) 0.

ning.-Page 44http://vustudents.com d) Permanent income Question 10 The marginal propensity to consume is equal to: a) Total spending / total consumption b) Total consumption / total income c) Change in consumption / change in income d) Change in consumption / change in savings Unit 25 Question 1 An increase in investment is most likely to be caused by: a) Lower interest rates b) Lower national income c) A decrease in the marginal propensity to consume d) An increase in withdrawals Question 2 An outward shift in the Marginal Efficiency of Capital should: a) Decrease consumption b) Increase aggregate demand c) Reduce aggregate supply d) Slow economic growth Question 3 An increase in interest rates: a) Is likely to reduce savings b) Is likely to reduce the external value of the currency c) Leads to a shift in the MEC schedule d) Leads to a movement along the MEC schedule Question 4 The accelerator assumes: a) The marginal propensity to consume is constant b) The economy is at full employment c) There is a constant relationship between net investment and the rate of change of output d) The multiplier is constant Question 5 Investment depends mainly on: m.salman.asif2006@gmail.com http://vustudents.com .ning.

-Page 45http://vustudents.salman.com http://vustudents.ning.asif2006@gmail.ning.com a) Past levels of income b) Future expected profits c) Present national income levels d) Historic data Question 6 A profit maximising firm will invest up to the level of investment where: a) The cost of borrowing equals the marginal efficiency of capital b) The cost of borrowing is greater than the marginal efficiency of capital c) The cost of borrowing is less than the marginal efficiency of capital d) The cost of borrowing equals the marginal propensity to consume Question 7 Investment is: a) An injection that increases aggregate demand b) A withdrawal that increases aggregate demand c) An injection that decreases aggregate demand d) A withdrawal that decreases aggregate demand Question 8 Investment is an unstable element of aggregate demand because is depends heavily on: a) Government policy b) Expectations c) National income d) Historic trends Question 9 If an increase in investment leads to a bigger increase in national income this is called the: a) Accelerator b) Aggregate demand c) Monetarism d) Multiplier Question 10 The difference between gross investment and net investment is: a) Depreciation b) Acceleration c) Deceleration d) Capital investment Unit 26 m.com .

000).com Question 1 An expansionist fiscal policy could include: a) Lower interest rates b) Increased lending by the banks c) An increase in corporation tax d) An increase in discretionary government spending Question 2 If the economy grows the government's budget position will automatically: a) Worsen b) Improve c) Stay the same d) Increase with inflation Question 3 Fiscal drag occurs when: a) Tax bands do not increase with inflation b) Tax rates move inversely with inflation c) Government spending falls to reduce aggregate demand d) Tax bands increase with inflation Question 4 If the marginal rate of tax is 40% and consumers' income increase from £10. after that.salman. Question 6 m. this means that the average tax is 25% (£5000 out of £20.000 c) The amount of tax paid will increase by £800 d) The total tax paid will be £4.000 The total tax paid is £5000. there is a tax of 50%.ning.000 to £12.-Page 46http://vustudents.com . Question 5 Imagine there is no tax on income up to £10000.asif2006@gmail.000: a) The amount of tax paid will increase by £4.ning.800 The extra tax paid is £800 (= 40%*£2000). What is the average tax rate on an income of £20000? a) £5000 b) 20% c) 25% d) £10.800 b) The amount of tax paid will increase by £4.com http://vustudents.

-Page 47http://vustudents.ning.asif2006@gmail.com .com The marginal rate of tax paid is: a) The total tax paid / total income b) Total income / total tax paid c) Change in the tax paid / change in income d) Change in income / change in tax paid Question 7 In a regressive tax system: a) The amount of tax paid increases with income b) The marginal rate of tax decreases with more income c) The average rate of tax falls as income increases d) The average rate of tax is constant as income increases Question 8 The Public Sector Net Cash Requirement (PSNCR) is: a) A measure of the country's trade position b) A measure of the country's budget position c) A measure of the country's total debt d) A measure of the government's monetary stance Question 9 A government might use tax to: a) Discourage consumption of positive externalities b) Discourage consumption of public goods c) Discourage consumption of merit goods d) Discourage consumption of negative externalities Question 10 As an economy grows: a) The government's budget position should automatically improve b) The government's budget position should automatically worsen c) This will have no effect on the government's budget position d) This will reduce the government's tax revenue Unit 27 Question 1 If people are made unemployed because of a fall in aggregate demand this is known as: a) Frictional unemployment b) Seasonal unemployment c) Cyclical unemployment m.salman.ning.com http://vustudents.

ning.com http://vustudents.com .asif2006@gmail.salman.ning.com d) Structural unemployment Question 2 Supply side policies are most appropriate to cure: a) Involuntary unemployment b) Cyclical unemployment c) Voluntary unemployment d) A fall in aggregate demand Question 3 The natural rate of unemployment is likely to fall if: a) Unemployment benefits increase b) Income tax increases c) More training is available for the unemployed d) Geographical immobility increases Question 4 If the real wage is too high in the labour market: a) The quantity demanded of labour is higher than the quantity supplied b) The quantity demanded of labour equals the quantity supplied c) The quantity demanded of labour is lower than the quantity supplied d) It will automatically adjust in the short run to bring about equilibrium Question 5 If there is cyclical unemployment in the economy the government might: a) Increase interest rates b) Encourage savings c) Cut taxes d) Reduce government spending Question 6 Occupational immobility of labour occurs if: a) People lack information b) People do not want to work c) People do not have the right skills to work d) People cannot afford to move location Question 7 Which of the following is not a supply side measure? a) Increased training m.-Page 48http://vustudents.

ning.salman. this may lead to less spending which may reduce demand further.-Page 49http://vustudents.ning.com http://vustudents.asif2006@gmail.com .com b) Providing more information c) Helping individuals to move location to find work d) Increasing spending on existing industries Question 8 Reducing involuntary unemployment: a) Helps the economy move on to the Production Possibility Frontier b) Helps shift the economy's Production Possibility Frontier outwards c) Helps the economy move along its Production Possibility Frontier d) Helps the economy move inside the Production Possibility Frontier Question 9 Less demand in the economy may increase unemployment. This is called: a) The upward accelerator b) The downward multiplier c) The upward PPF d) The downward mpc Question 10 To reduce cyclical unemployment the government might: a) Increase the budget surplus b) Increase the balance of payments deficit c) Reduce interest rates d) Reduce government expenditure Unit 28 Question 1 The precautionary demand for money is: a) An idle balance b) An active balance c) Directly related to interest rates d) Inversely related to income Question 2 The liquidity trap occurs when the demand for money: a) Is perfectly interest elastic b) Is perfectly interest inelastic c) Means that an increase in money supply leads to a fall in the interest rate d) Means that an increase in the money supply leads to an increase in the interest rate m.

-Page 50http://vustudents.ning.com Question 3 A fall in interest rates is likely to: a) Increase aggregate demand b) Increase savings ) Decrease consumption d) Decrease exports Question 4 According to the quantity theory of money an increase in the money supply is most likely to lead to inflation if: a) The velocity of circulation decreases b) The number of transactions decreases c) There is deflation d) The velocity of circulation and the number of transactions is constant Question 5 A reduction in the money supply is likely to: a) Reduce the interest rate b) Increase the interest rate c) Increase inflation d) Decrease deflation Question 6 To reduce the supply of money the government could: a) Reduce interest rates b) Buy back government bonds c) Sell government bonds d) Encourage banks to lend Question 7 The speculative demand for money occurs when: a) Individuals hold money just in case an emergency happens b) Individuals hold money to buy things c) Individuals hold money rather than other assets because they are worried about the price of the other assets falling d) Individuals hold money to shop Question 8 An outward shift in the demand for money.com http://vustudents. other things being equal should lead to: m.salman.ning.asif2006@gmail.com .

asif2006@gmail.-Page 51http://vustudents.com a) A lower interest rate but the same quantity of money b) A higher interest rate but the same quantity of money c) A higher quantity of money but lower interest rates d) A higher quantity of money but the same interest rate Question 9 The interest rate in the UK is determined by: a) The government b) The electorate c) The Monetary Policy Committee d) The Federal Reserve Board Question 10 Open Market Operations occur when the government: a) Reduces the interest rate b) Buys and sells bonds and securities c) Increases taxation d) Increases the exchange rate Unit 29 Question 1 Demand pull inflation may be caused by: a) An increase in costs b) A reduction in interest rate c) A reduction in government spending d) An outward shift in aggregate supply Question 2 Inflation: a) Reduces the cost of living b) Reduces the standard of living c) Reduces the price of products d) Reduces the purchasing power of a pound Question 3 An increase in injections into the economy may lead to: a) An outward shift of aggregate demand and demand pull inflation b) An outward shift of aggregate demand and cost push inflation c) An outward shift of aggregate supply and demand pull inflation d) An outward shift of aggregate supply and cost push inflation Question 4 m.com .salman.ning.ning.com http://vustudents.

-Page 52http://vustudents.com .com An increase in aggregate demand is more likely to lead to demand pull inflation if: a) Aggregate supply is perfectly elastic b) Aggregate supply is perfectly inelastic c) Aggregate supply is unit elastic d) Aggregate supply is relatively elastic Question 5 An increase in costs will: a) Shift aggregate demand b) Shift aggregate supply c) Reduce the natural rate of unemployment d) Increase the productivity of employees Question 6 The effects of inflation on the price competitiveness of a country's products may be offset by: a) An appreciation of the currency b) A revaluation of the currency c) A depreciation of the currency d) Lower inflation abroad Question 7 Menu costs in relation to inflation refer to: a) Costs of finding better rates of return b) Costs of altering price lists c) Costs of money increasing its value d) Costs of revaluing the currency Question 8 In the short run unemployment may fall below the natural rate of unemployment if: a) Nominal wages have risen less than inflation b) Nominal wages have risen at the same rate as inflation c) Nominal wages have risen more than inflation d) Nominal wages have risen less than unemployment Question 9 According to the Phillips curve unemployment will return to the natural rate when: a) Nominal wages are equal to expected wages b) Real wages are back at equilibrium level c) Nominal wages are growing faster than inflation d) Inflation is higher than the growth of nominal wages m.asif2006@gmail.ning.com http://vustudents.salman.ning.

-Page 53http://vustudents.asif2006@gmail.ning.ning.com http://vustudents.com Question 10 The Phillips curve shows the relationship between inflation and what? a) The balance of trade b) The rate of growth in an economy c) The rate of price increases d) Unemployment Unit 30 Question 1 If the value of the pound in other currencies is strong: a) The price of UK products abroad in foreign currency will fall b) The price of UK products abroad in foreign currency will rise c) The price of UK products in the UK will rise d) The price of UK products in the UK will fall Question 2 If the value of the pound in other currencies rises: a) The spending on UK exports in pounds must rise b) The spending on UK exports in foreign currency will rise if demand is price elastic c) The demand for UK exports will rise d) The spending on UK exports in foreign currency will fall if demand for UK exports is price elastic Question 3 The supply of pounds to the currency market will be upward sloping if: a) The demand for UK exports is price elastic b) The demand for UK exports is price inelastic c) The demand for imports into the UK is price elastic d) The demand for imports into the UK is price inelastic Question 4 A fall in the value of the pound is likely to decrease spending on imports if: a) The price elasticity of demand for imports is price elastic b) The price elasticity of demand for imports is price inelastic c) The price elasticity of demand for imports has a unit price elasticity d) The price elasticity of demand for exports is price elastic Question 5 If the exchange rate is above the equilibrium level: a) There is excess demand and the exchange rate will fall m.salman.com .

ning.-Page 54http://vustudents.com b) There is excess supply and the exchange rate will fall c) There is excess demand and the exchange rate will rise d) There is excess supply and the exchange rate will rise Question 6 If the exchange rate is below the equilibrium level: a) There is excess demand and the exchange rate will fall b) There is excess supply and the exchange rate will fall c) There is excess demand and the exchange rate will rise d) There is excess supply and the exchange rate will rise Question 7 To prevent the exchange rate rising the government could: a) Sell its own currency b) Increase interest rates c) Buy its own currency d) Sell foreign currency Question 8 A depreciation of a currency occurs when: a) The value of the currency falls b) The value of the currency increases c) Inflation falls d) The balance of payments improves Question 9 An appreciation of the currency may occur if: a) Domestic interest rates fall b) There is an increase in demand for imports c) There is an increase in demand for exports d) There is an increase in the balance of payments deficit Question 10 A fall in the external value of a currency: a) May cause an outward shift in the demand for the currency b) May cause an inward shift in the supply for the currency c) May lead to a movement along the demand curve for a currency d) May be due to a increase in demand for the country's exports Unit 31 m.asif2006@gmail.com http://vustudents.salman.ning.com .

com Question 1 Which of the following is not an argument for protectionism? a) To protect infant industries b) To increase the level of imports c) To protect strategic industries d) To improve the balance of payments Question 2 A demand switching policy could be a) Higher interest rates b) Higher income tax c) Tariffs d) Reduced government spending Question 3 Free trade is based on the principle of: a) Comparative advantage b) Comparative scale c) Economies of advantage d) Production possibility advantage Question 4 If a country can produce 10 of product A or 4 of product B the opportunity cost of 1B is: a) 0.salman.-Page 55http://vustudents.ning.4A b) 2. Question 5 Tariffs: a) Decrease the domestic price of a product b) Increase government earnings from tax c) Increase the quantity of imports d) Decrease domestic production Question 6 The terms of trade measure: a) The income of one country compared to another m.com http://vustudents.5A.5A c) 10A d) 1B If a country can produce 10 of product A or 4 of product B the opportunity cost of 1B is 2.asif2006@gmail.com .ning.

com .com b) The GDP of one country compared to another c) The quantity of exports of one country compared to another d) Export prices compared to import prices Question 7 In a floating exchange rate system: a) The government intervenes to influence the exchange rate b) The exchange rate should adjust to equate the supply and demand of the currency c) The Balance of Payments should always be in surplus d) The Balance of payments will always equal the government budget Question 8 The marginal propensity to consume is equal to: a) Total spending / total consumption b) Total consumption / total income c) Change in consumption / change in income d) Change in consumption / change in savings Question 9 If there is a balance of payments deficit then in a floating exchange rate system: a) The external value of the currency would tend to fall b) The external value of the currency would tend to rise c) The injections from trade are greater than the withdrawals d) Aggregate demand is increasing Question 10 To prevent the external value of the currency from falling the government might: a) Reduce interest rates b) Sell its own currency c) Buy its own currency with foreign reserves d) Increase its own spending Unit 32 Question 1 Members of the European Union: a) Have the same interest rates b) Have one set of laws c) All have the euro currency d) Have common tariffs against non members Question 2 m.asif2006@gmail.ning.ning.-Page 56http://vustudents.salman.com http://vustudents.

com Which of the following is not a member of the European Union? a) France b) Russia c) Bulgaria d) Poland Question 3 The population of the European Union is approximately what? a) 50 million b) 450 million c) 1000 million d) 2000 million Question 4 Within the European Union: a) There are no tariffs between member countries b) All member countries have the euro currency c) All member countries have the same taxation policies d) All member countries have the same defence policy Question 5 Belonging to the European Union: a) Encourages trade with non member countries b) Encourages trade with member countries c) Encourages protectionism within the union d) Encourages countries to act independently Question 6 The UK: a) May join the European Union in the future b) Relies on the European Union for all of its trade c) Relies on the European Union for much of its tax revenue d) Joined the European Union in 1973 Question 7 The CAP is: a) The Common Agricultural Policy b) The Common Alien Policy c) The Community Agricultural Premium d) The Cost And Price agreement m.com http://vustudents.asif2006@gmail.ning.com .salman.-Page 57http://vustudents.ning.

-Page 58http://vustudents.com Question 8 By having a bigger target market within the European Union a firm might benefit from economies of scale. Which of the following is not an economy of scale? a) Purchasing b) Financial c) Managerial d) Allocative efficiency Question 9 Which of the following is not a European institution? a) European Parliament b) European Commission c) European Congress d) European Council Question 10 Which of the following could be a problem of being a member of the European Union? a) Greater competition b) More customers c) Easier access to markets d) Greater uniformity in markets Unit 33 Question 1 Which of the following is not a way of helping developing economies? a) Aid b) Loans c) Protectionism of developed markets d) Training and education programmes Question 2 Developing economies usually have: a) Low GDP per capita b) Low CPI c) Large balance of payments surpluses d) Large budget surpluses Question 3 Demand for primary products is likely to be: m.ning.salman.asif2006@gmail.ning.com .com http://vustudents.

salman.ning.com http://vustudents.ning.asif2006@gmail.com a) Very sensitive to price b) Price elastic c) Unit elastic d) Income inelastic Question 4 Developing economies usually: a) Have large industrialised sectors b) Are dependent on primary products c) Have high levels of wealth d) Earn more from exports than is spent on imports Question 5 Earning from primary products are often unstable because: a) Demand is price elastic b) Supply is price elastic c) Supply conditions are relatively stable d) Supply conditions are unstable Question 6 Over time the price of primary products tends to fall because: a) Demand is income elastic b) Supply is income elastic c) Of outward shifts in supply d) Demand is price elastic Question 7 Less Developed Countries tend to have: a) A high average age b) A slow population growth rate c) High life expectancy d) A low literacy rate Question 8 In a Less Developed Country: a) The infrastructure is likely to be good b) Real wages are likely to be high c) Unemployment is likely to be low d) The primary sector is likely to be significant Question 9 m.com .-Page 59http://vustudents.

salman.com .ning.com http://vustudents.ning.asif2006@gmail.com An injection of funds into a Less Developed Country might set off the: a) Multipler b) Marginal propensity to save c) Average propensity to consume d) The Laffer effect Question 10 The marginal propensity to consume in a Less Developed Country is likely to be: a) Less than 0 b) Nearly 0 c) High d) Low Unit 34 Question 1 Which of the following is not a global organisation? a) IMF b) World Bank c) Competition Commission d) WTO Question 2 Globalisation is likely to increase with: a) More protectionism b) An increase in tariffs c) More trade within countries d) Greater trade flows between countries Question 3 A multinational business: a) Sells products abroad b) Produces in more than one country c) Imports from abroad d) Sells only domestically Question 4 Which of the following best describes the selling of a production licence to another firm? a) Hands over all rights to its products b) Sells its products abroad c) Sells the right to produce to another business d) Sells the business to another business m.-Page 60http://vustudents.

com Question 5 Globalisation is made more difficult by: a) The actions of the World Trade Organisation b) The removal of protectionist measures c) Exchange rate instability d) More free trade agreements Question 6 Finding a partner to work with abroad is called a: a) Takeover b) Merger c) Acquisition d) Joint venture Question 7 Some pressure groups oppose globalisation. The best economic reason for opposition would be: a) World trade may increase b) The marginal social benefits of globalisation are less than the marginal social costs c) Global standards of living may rise d) World income inequality may increase Question 8 The UK would not have attracted inward investment because: a) It is within the European Union b) English is a common world wide language c) It has a stable economic system d) A strong pound may have made it cheaper for foreign buyers to purchase UK companies Question 9 Why might a country resist globalisation? a) Greater choice of final products b) Greater choice of supplies c) Greater competition for domestic firms d) More markets to sell to Question 10 World trade has been increasing due to: m.com .-Page 61http://vustudents.ning.asif2006@gmail.salman.ning.com http://vustudents.

salman.ning.com http://vustudents.ning.com .com a) Increased tariffs b) Increased legal barriers c) Increased embargoes d) Reduced protectionism m.-Page 62http://vustudents.asif2006@gmail.

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